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Floating exchange rate, a positive step – CIS

The Chartered Institute of Stockbrokers has lauded the Central Bank of Nigeria for the re-introduction and re-modelling of the floating single foreign exchange policy, saying it is a positive and bold step.

The move, it noted in a statement on Monday, attested to the dynamism of the apex bank in policy evolution for the greater benefit of the economy.

“The operating dynamics of the new framework as stipulated by the CBN is in accordance with the tenets of democratic capitalism of which the highlights are, market-driven systems, free participation within individual limitations and the ‘invisible hand’,” it explained.

The introduction of a forward market to hedge volatility in the foreign exchange market, and the licensing of foreign exchange primary dealers, according to the body, are well commended innovations which will deepen the market.

Barring systemic malfunction, the CIS it was convinced that the implementation of the new framework would boost dollar supply; and with clarity, define the exact exchange rate, ease the challenges of businesses across the board and return the economy to the path of growth.

The currency peg of the past 16 months resulted in a dearth of dollar currency and prompted large scale capital flight with the attendant growth challenges in the economy, it said.

The CIS added, “Foreign inflows into the capital market dropped by 32 per cent in 2015, as reported by the Nigerian Stock Exchange, just as the benchmark equity index fell by 17 per cent this year.

“The new foreign exchange policy will bolster investor confidence, trigger inflow of foreign portfolio investments and boost the velocity of the stock market.”

The CIS reiterated its supports for the continual restriction of the 41 excluded items from the interbank foreign exchange market, saying the the exclusion of the items supported the infant industry argument.

“CIS believes that an admixture strategy of the floating foreign exchange policy, an intensive export promotion drive, support for the infant industry argument and pump priming will give fillip to the economy. Going forward, we are optimistic on the growth prospects of the economy in 2017,” the statement added.

Meanwhile, the Chartered Institute of Stockbroker’s President and Chairman of the Council, Mr. Oluwaseyi Abe, said that the coast was already clear for the investors to shore up their holdings as market had begun to rebound.

According to him, there is nothing unusual about the current state of the market as the market essentially mirrors the economy and moves in phases.